Shares of Dalmia Bharat fell to a 52-week low following a weak September-quarter report. The company saw a 29% drop in operating profit as volume growth lagged behind the broader industry. Investors are now concerned about rising costs, high debt levels, and low factory utilization.
Dalmia Bharat shares touched a 52-week low on Tuesday as investors reacted to a disappointing performance in the September quarter. The company struggled to keep pace with the rest of the cement industry, raising concerns about its current market share and profitability.
The core issue for the company was a sharp 29% decline in operating profit, also known as EBITDA, which fell to ₹493 crore. A major reason for this was that the company’s sales volume grew by only 3% compared to the same time last year. This is notably lower than the 9-10% growth seen across the wider cement sector, suggesting that Dalmia Bharat is losing ground to its competitors in key regions like the east and northeast.
Profitability per tonne has also hit a multi-quarter low of ₹694. This has been squeezed by two main factors: lower average selling prices and rising costs. The company is currently facing higher fuel expenses, which are expected to persist into the next quarter. Additionally, the recent integration of cement assets acquired from JaiPrakash Associates is adding extra costs of ₹100-125 per tonne while the new business is being scaled up.
Another area of focus for the market is the company’s balance sheet. Net debt has climbed to ₹5,722 crore, pushing the net-debt-to-operating-profit ratio to 2x, up from 1.5x in the previous quarter. The challenge for management is to manage this debt while continuing its aggressive expansion plans, which involve spending over ₹3,000 crore annually.
Operational efficiency is also under the spotlight. While the company has been rapidly adding capacity, its utilization rate—a measure of how much of its production capacity is actually used—remained low at 58% during the first half of the financial year. Over the last five years, capacity has grown at a 10% annual rate, but sales volume growth has lagged at 7.7%, indicating that the company is currently struggling to sell all the cement it can produce.
Investors will now be watching to see if the company can improve its sales volume in the second half of the year. The key focus for the coming months will be whether management can stabilize profit margins, control debt, and successfully ramp up capacity utilization at its new facilities in Belgaum, Pune, and Kadapa.